Political India: Engaging America

From The Hindu

“Addressing the [United States'] fiscal problems will require difficult choices, but postponing them will only make them more difficult,” said Federal Reserve Chairman Ben Bernanke during a Congressional testimony on Wednesday.

Reiterating a note of concern about the country's fiscal position, which he also mentioned in a speech earlier this month, Mr. Bernanke cautioned that though sizable deficits were unavoidable in the short term, maintaining the confidence of the public and financial markets required policymakers to “move decisively” to set the federal budget on a trajectory toward sustainable fiscal balance.

In very similar language — and his language is carefully watched by U.S. economists to gauge his view on the economy's prospects — Mr. Bernanke said in an earlier speech that addressing the fiscal challenges posed by an aging population would require “a willingness to make difficult choices”.

In his testimony, he struck a more positive note arguing that “On balance, the incoming data suggest that growth in private final demand will be sufficient to promote a moderate economic recovery in coming quarters”.

Mr. Bernanke, nevertheless, underscored “weakness” in residential and non-residential construction and the “poor fiscal condition” of state and local governments. He said that the sales of new and existing homes had dropped in January and February, and “the pace of new single-family housing starts has changed little since the middle of last year.”

He added that pressures on state and local budgets, though bolstered by federal support, “have led to continuing declines in employment and construction spending by state and local governments”.

While again striking a note of optimism on the job fronts for the future, he said that the present scenario appeared bleak: “The labour market was particularly hard hit by the recession. Recently, we have seen some encouraging signs that layoffs are slowing and that employment has turned up.”

He noted, however, that “if the pace of recovery is moderate, as I expect, a significant amount of time will be required to restore the 8-1/2 million jobs that were lost during the past two years”.

He expressed concern about the fact that, in March, “44 percent of the unemployed had been without a job for six months or more.”

Labels: Ben Bernanke, fiscal problems